Bloomberg (gated) with the item: China Banks Offer 25-Year Loans to LGFVs to Avert Credit Crunch

  • China’s biggest state banks are offering local government financing vehicles loans with ultra-long maturities and temporary interest relief to prevent a credit crunch amid growing tension in the $9 trillion debt market, according to people familiar with the matter.
  • Banks … have started to ramp up loans that mature in 25 years, instead of the prevailing 10-year tenor for most corporate lending, to qualified LGFVs with high creditworthiness in recent months, said the people, asking not to be identified discussing a private matter.
  • Some came with waivers on any interest or principal payments in the first four years, though the interest will be accrued for later, the people said. The total size of the longer-term loans to LGFVs couldn’t immediately be determined.

Such moves in China indicate why authorities are reluctant to splash out large-scale stimulus. So far the limited monetary policy moves have been it.